Currency in AUD
Last close As at 09/06/2023
AUD0.01
— 0.00 (0.00%)
Market capitalisation
AUD99m
Research: Metals & Mining
On 16 December, Lepidico announced a binding offtake agreement with world-renowned metal trader Traxys for 100% of its lithium hydroxide production for seven years (or 35,000t of LiOH) from its Phase 1 project. The agreement accommodates Lepidico’s marketing strategy of supplying both battery supply chain and industrial market customers in that it also allows the company to agree the sale of lithium chemicals to independent third parties, with Traxys administering any such sales by means of a back-to-back contract. It also contemplates a US supply nexus to support the debt funding envisaged under Lepidico’s formal mandate with the US International Development Finance Corporation (DFC).
Lepidico |
Binding offtake signed with Traxys |
Offtake agreement signed |
Metals & mining |
17 December 2021 |
Share price performance
Business description
Next events
Analyst
Lepidico is a research client of Edison Investment Research Limited |
On 16 December, Lepidico announced a binding offtake agreement with world-renowned metal trader Traxys for 100% of its lithium hydroxide production for seven years (or 35,000t of LiOH) from its Phase 1 project. The agreement accommodates Lepidico’s marketing strategy of supplying both battery supply chain and industrial market customers in that it also allows the company to agree the sale of lithium chemicals to independent third parties, with Traxys administering any such sales by means of a back-to-back contract. It also contemplates a US supply nexus to support the debt funding envisaged under Lepidico’s formal mandate with the US International Development Finance Corporation (DFC).
Year end |
Total revenues (A$m) |
PBT |
Cash from operations (A$m) |
Net cash/(debt)* |
Capex |
06/20 |
0.0 |
(10.8) |
(4.7) |
(0.4) |
(7.5) |
06/21 |
4.1 |
(0.3) |
1.0 |
14.7 |
(0.6) |
06/22e |
0.0 |
(27.3) |
(31.6) |
(46.2) |
(50.5) |
06/23e |
171.8 |
103.9 |
90.4 |
(91.2) |
(135.4) |
Note: *Historical numbers include Desert Lion Energy convertible. FY22 forecasts updated for FX and equity raised; we have introduced FY23 estimates.
Flexible sales agreement
Under the terms of the agreement, Traxys will act as principal and provide sales and marketing, logistics and trade finance services to Lepidico for a period of seven years (with an option to extend) at industry standard commission rates. It also includes Traxys acting as agent for Lepidico’s caesium sulphate output, with scope to expand to other co- and by-products by mutual agreement.
Valuation: Up to 5.70c/share; potentially 8.48c/share
Lepidico’s Phase 1 Plant project has been materially de-risked by its running of an earlier pilot plant campaign. Both its Karibib mine in Namibia and its chemical plant in Abu Dhabi are now fully permitted to construct. Having raised initial equity, it is now committing to Phase 1 development activities to keep the project on a fast track, in parallel with its ongoing funding workstreams (now that binding lithium offtake has been secured) and continual improvements in environmental and social performance. In our last note on the company (Phase 2 coming into view, published on 18 June 2021), we valued Lepidico at 4.96c/share and this has now risen by 14.9% (plus with greater confidence now that offtake negotiations have concluded) to 5.70c plus a potential risk-adjusted 0.64–1.53 cents (post-FY22 equity funding) for a conceptual 20,000tpa LCE Phase 2 plant. The largest components of the increase in this case were the advancement of the project by one year into FY22 (+0.46c), forex (+0.24c) and the increase in Lepidico’s share price to 3.7c (+0.11c), thereby reducing future dilution. Our long-term lithium price assumptions are unchanged (US$15,091/t for lithium hydroxide and US$12,000/t for lithium carbonate). However, both the lithium carbonate and lithium hydroxide prices have been rising strongly since their troughs in Q420 and, at a recent LiOH price of US$19,500/t, for example, our valuation rises by a further 48.8%, to 8.48c/share. Note that this valuation still does not attribute any value to Lepidico from either the supply of concentrate from third-party sources or any other development options (eg third-party, technology licensing).
Exhibit 1: Financial summary
Accounts: IFRS, Yr end: June, AUD: Thousands |
|
|
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
Total revenues |
|
|
171 |
2 |
47 |
4,137 |
0 |
171,816 |
Cost of sales |
|
|
0 |
0 |
0 |
0 |
(23,499) |
(54,648) |
Gross profit |
|
|
171 |
2 |
47 |
4,137 |
(23,499) |
117,168 |
SG&A (expenses) |
|
|
(5,284) |
(4,006) |
(4,904) |
(3,398) |
(3,146) |
(3,146) |
Exceptionals and adjustments |
Exceptionals |
|
(2,171) |
(1,150) |
(2,740) |
(338) |
0 |
0 |
Depreciation and amortisation |
|
|
(6) |
(8) |
(1,208) |
(713) |
(713) |
(5,944) |
Reported EBIT |
|
|
(7,290) |
(5,162) |
(8,805) |
(311) |
(27,358) |
108,078 |
Finance income/(expense) |
|
|
70 |
57 |
17 |
0 |
74 |
(4,224) |
Exceptionals and adjustments |
Exceptionals |
|
0 |
0 |
(2,026) |
0 |
0 |
0 |
Reported PBT |
|
|
(7,220) |
(5,105) |
(10,814) |
(311) |
(27,284) |
103,854 |
Income tax expense (includes exceptionals) |
|
|
0 |
0 |
696 |
593 |
0 |
0 |
Reported net income |
|
|
(7,220) |
(5,105) |
(10,118) |
283 |
(27,284) |
103,854 |
Basic average number of shares, m |
|
|
2,624 |
3,272 |
4,568 |
5,218 |
6,448 |
6,745 |
Basic EPS (c) |
|
|
(0.0) |
(0.0) |
(0.0) |
0.0 |
(0.0) |
0.0 |
|
|
|
|
|
|
|
|
|
Balance sheet |
|
|
||||||
Property, plant and equipment |
|
|
27 |
20 |
1,904 |
1,669 |
51,439 |
180,897 |
Intangible assets |
|
|
19,027 |
22,925 |
23,870 |
24,631 |
24,631 |
24,631 |
Other non-current assets |
|
|
730 |
27,469 |
42,798 |
44,058 |
44,058 |
44,058 |
Total non-current assets |
|
|
19,783 |
50,414 |
68,573 |
70,358 |
120,129 |
249,586 |
Cash and equivalents |
|
|
4,860 |
13,660 |
4,793 |
14,738 |
14,738 |
14,738 |
Inventories |
|
|
0 |
0 |
0 |
0 |
0 |
14,318 |
Trade and other receivables |
|
|
712 |
1,869 |
1,767 |
244 |
7,183 |
14,122 |
Total current assets |
|
|
5,572 |
15,529 |
6,560 |
14,982 |
21,921 |
43,178 |
Non-current loans and borrowings |
|
|
0 |
3,276 |
5,215 |
0 |
60,944 |
105,914 |
Other non-current liabilities |
|
|
0 |
0 |
10,055 |
9,283 |
9,283 |
9,283 |
Total non-current liabilities |
|
|
0 |
3,276 |
15,271 |
9,283 |
70,227 |
115,197 |
Trade and other payables |
|
|
804 |
10,940 |
565 |
968 |
2,859 |
4,750 |
Current loans and borrowings |
|
|
0 |
0 |
0 |
0 |
0 |
0 |
Other current liabilities |
|
|
51 |
86 |
108 |
140 |
140 |
140 |
Total current liabilities |
|
|
856 |
11,026 |
672 |
1,108 |
2,999 |
4,890 |
Equity attributable to company |
|
|
24,500 |
53,252 |
52,404 |
68,314 |
62,187 |
167,206 |
Non-controlling interest |
|
|
0 |
(1,610) |
6,785 |
6,636 |
6,636 |
5,471 |
|
|
|
|
|
|
|
|
|
Cashflow statement |
|
|
||||||
Profit for the year |
|
|
(7,220) |
(5,105) |
(10,118) |
283 |
(27,284) |
103,854 |
Taxation expenses |
|
|
0 |
0 |
(696) |
(593) |
0 |
0 |
Depreciation and amortisation |
|
|
6 |
8 |
1,208 |
713 |
713 |
5,944 |
Share based payments |
|
|
2,138 |
520 |
1,027 |
338 |
0 |
0 |
Other adjustments |
|
|
2,066 |
664 |
4,716 |
(497) |
0 |
0 |
Movements in working capital |
|
|
(28) |
410 |
(1,509) |
201 |
(5,048) |
(19,366) |
Income taxes paid |
|
|
0 |
0 |
696 |
593 |
0 |
0 |
Cash from operations (CFO) |
|
|
(3,038) |
(3,504) |
(4,676) |
1,037 |
(31,619) |
90,432 |
Capex |
|
|
(3,057) |
(6,251) |
(7,452) |
(550) |
(50,483) |
(135,401) |
Acquisitions & disposals net |
|
|
110 |
0 |
416 |
0 |
0 |
0 |
Cash used in investing activities (CFIA) |
|
|
(2,947) |
(6,251) |
(7,036) |
(550) |
(50,483) |
(135,401) |
Net proceeds from issue of shares |
|
|
7,555 |
18,462 |
3,523 |
14,707 |
21,158 |
0 |
Movements in debt |
|
|
0 |
0 |
0 |
(5,176) |
60,944 |
44,970 |
Cash from financing activities (CFF) |
|
|
7,555 |
18,462 |
3,523 |
9,531 |
82,102 |
44,970 |
Increase/(decrease) in cash and equivalents |
|
|
1,570 |
8,707 |
(8,190) |
10,017 |
0 |
0 |
Currency translation differences and other |
|
|
(17) |
93 |
(678) |
(72) |
0 |
0 |
Cash and equivalents at end of period |
|
|
4,860 |
13,660 |
4,793 |
14,738 |
14,738 |
14,738 |
Net (debt) cash |
|
|
4,860 |
10,385 |
(422) |
14,738 |
(46,206) |
(91,176) |
Movement in net (debt) cash over period |
|
|
1,553 |
5,525 |
(10,807) |
15,160 |
(60,944) |
(44,970) |
Source: company sources, Edison Investment Research
|
|
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